R.T. from New Haven County writes:
Dear Mister Condo,
I live in condo units that are duplexes; 2 units per building. There are a few that are 3 units per building but 90% are 2 units per building. Units are basically identical. The main difference is that some have finished walk out basements. The original declaration, some 20 years ago, stated condo fees were based on square footage. The board wants to raise condo fees to build the Reserve Fund for major renovation of the roof in 2031. The Board is taking entire cost to replace the roofs on the 92 units and then dividing the cost by ownership percentage which as I stated earlier is based on square footage. My problem is 2 identical units, one with a walk out the other with no walk out. The walk out unit has the same square footage of the basement included, thus a higher ownership % and higher condo fee. Roof size is the same. They want to increase condo fees across the board, 5% starting next year to pay for roof replacement 20 years from today. The total cost is approximately $200,000.00. There are 40 walkout units and 22 with new walk outs units; the roofs are with 50 square feet of each other most though are identical. The cost using the current declaration on ownership will have the walkout units paying over $2,800 with the non walkout units paying a little more than $1660, In fact the walkout units are subsidizing the other units, even though the cost to replace the roofs on all the units $2,150. I want this treated as onetime assessment and each owner to pay the cost of their unit not divide the cost by who has more square footage because they have a walkout.
Mister Condo replies:
R.T., the good news is that your Board is doing an admirable job of building the Reserve Fund to handle the upcoming roof replacement. 2031 seems a long way away but it will be here before you know it and your community will have saved enough money to cover the roof repair. Hooray! The method for doing so has come into question so let’s talk about how associations raise money. When the condominium was developed a common fee schedule was designed that took into account the percentage of unit ownership. That is very common and almost all condominiums have a similar structure. There are other factors that can go into the formula (end units may pay more, units with water views may pay more, and so on) but the formula is the law of the land with regards to who pays what percentage of the common fees, which includes special assessments and Reserve Fund contributions. In other words, if Unit Owner A carries a 5% ownership and Unit Owner B carries a 10% ownership, then Unit owner B will pay twice as much in common fees. The formula isn’t usually so drastic and there is generally a smaller percentage gap between units with different square footages or desirability factors that went into determining their percentage share. You observation about walkout units subsidizing the other units is mathematically valid but it is also irrelevant as the unit owners have already agreed to pay their percentage of ownership when they purchased into the condominium. The percentage of unit ownership is the law of the land with regards to how common elements, including the Reserve Fund, are funded. I have to side with your Board on this one, R.T.. At least you can have peace of mind knowing that there will be money to pay for that roof when it needs replacing in 2031. All the best!
Percentage of Condo Unit Ownership Formula Questioned: http://t.co/EhteERrF02
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Please advise how is insurance premium charge for different size units? Kindly advise formula.
Thank you!
You should refer to your condo docs to see if there is any specific language regarding insurance expense. If not, it is treated as any other expense. Generally, that involves applying the percentage of unit owner model as discussed in the original post. All the best!
Our percentage of interest/ownership was calculated on unit and garage square footage but did not include any common area.
Our condo fee monthly is calculated by using the percentage of interest, but we are told that we all (44 units) share the common area cost equally. We all share equally in the ownership of the common areas.
I am totally confused.
Jo Ann, that is uncommon but not unheard of. If you haven’t already done so, it is time to review your governance documents to see what they say about the common fees and the common area. It is uncommon to have more than one formula in play but it is possible. If you see on the percentage of unit ownership as the only method of determining common fees, you need to question the Board and have them handle the fees correctly. If the documents support what they are currently doing, rest assured all is well. Either way, it shouldn’t be too hard for you and the Board to figure out if they are making the proper assessments. All the best!
question….if there is a higher percentage and higher maint. fee paid by certain units that are exactly the same as all other 28 units….in a townhouse setting….
do the owners who pay a higher maint. fee have more voting power and how does that work.
Isn’t it best for all units to pay the same maint. fee if units are the same and also common area is the same….there are no amenities.
There are 8 40B units and do these units who pay half of what other owners pay have the same voting power?
Also…..there are 4 units that are 10 years old that will likely require more work than brand new units who pay almost 100.00 more in maint. fee…..something seems wrong about this….these 4 units have 300 sq. ft. less than brand new units….but they are the only units that have a fireplace.
Please advise.
D., the only determining factor as to common fee assessments is the governing documents. They spell out what percentage of fees are due from each unit. While it is often based on square footage of the unit as a percentage of total square footage of all units, that is not always so. Other factors (i.e. – water views, top floor, closer to amenities, etc.) or any other formula can be used. It is published as part of the governance documents and it is the law of the land. Higher maintenance fees have no effect on voting powers. Again, the governance documents dictates the voting powers, typically one vote per unit. The age of an individual unit has no effect on the common fees but you are correct to assume an older unit will require more maintenance than a newer unit. eventually, all units will catch up with maintenance requirements. All the best!
Thank you Mister Condo,
In this case I understand that the formula using percentages was developed because of the 40B units.
I also understand that there may be a law stating that the “40B units can be required to pay the same amount in maintenance fees as the other units in a complex.
Before 2010, the beneficial interest percentages were kept artificially low for affordable units. This meant that the affordable units also had less voting power.(is this true?)
Condominium associations may continue this practice but are not obligated to by law. If a Condo Assoc. Chooses to charge more to affordable unit owners, they must also give them greater voting power as well.” (Does this mean they have less voting power-can you explain?)
I also understand that to legally change the percentage formula to fees based on sq. ft. there must be 100% agreement of all owners….which may seem impossible…but reasonable owners might agree some how.
There are no variations in the complex….no amenities…no views….no advantages anywhere.
The fact is some owners pay almost $100.00 more than the older units….and double the 40B’s. Also wondering …if 40B’s are able to pay much less…is there a formula to prove their need to pay less every year….do associations require proof some how….as situations also can change….as I believe that some 40B’s earn more than those who pay regular fees on fixed incomes. This all seems very unfair.
Do you have any thoughts on how to properly present this situation to be fair to everyone?
I appreciate your input.
Thank you
D., I assume you have reviewed the info online at https://www.mass.gov/chapter-40-b-planning-and-information. Beyond that, I have no different answer to give you. The governing documents spell out the fee arrangement. If there is a local, state, or federal law that trumps it, I am unaware. This would be a good time to query the association’s attorney to make sure that the common fee structure is being adhered to properly. All the best!
What would be the best situation to keep a happy and equitable small community?